The Legal Landscape for Long-Term Tenants in California

Since the 2007 Great Recession and the Global Pandemic in 2020 the housing stock in California has never reached back to the production rates necessary for the population of areas like the Bay Area. With a scarcity in homes available comes high costs for fewer able to buy a home.

This has created an increase in long-term tenants. This impact has created a demand for tenant rights. Landlords and property managers are now having to become experts in the California law to better be able to handle the role.

Laws are changing almost annually that is putting pressure on Landlords to accommodate the demands of tenants. This topic matters for landlords to consider and is becoming more central to people’s lives because tenant protections are increasing, housing prices are not going to come down any time soon, and landlords are facing more scrutiny and regulation.

This begs the question do landlords want long-term tenants? A landlord should consider the following possible pros and cons:

The Benefits of a Long-Term Tenant

1. A tenant who is locked into a base rent for the term of the lease provides financial stability to a landlord and helps with budgeting for mortgage, taxes, and maintenance.
2. Less frequent advertising, screening, and vacant downtime compared to short-term rentals.
3. Saves on repainting, deep cleaning, and rekeying between tenants. Good long-term tenants are more likely to care for the property, maintain cleanliness, and form a positive relationship with you.
4. With consistent occupancy, you avoid the constant churn of new tenants who may require more orientation or raise more questions early on.
5. It is easier to plan for larger repairs and improvements without interruptions from tenant turnover.
6. Long-term leases can attract tenants looking for stability, such as professionals or families, who may be lower risk for unpaid rent or damage.

The Risks of a Long-Term Tenant

1. Landlords cannot adjust rent mid-lease except as specified in the lease (and in compliance with California rent control laws, if applicable as outlined below). In high-demand areas, locking in rent for multiple years may mean you miss potential increases.
2. If the tenant becomes troublesome, you may have fewer opportunities to end the tenancy unless they breach the lease terms or fall under an allowed just-cause eviction reason.
3. If the rental market drops, you’re stuck with the agreed rent even if it’s above current market rates (which may lead to more tenant dissatisfaction).
4. In California, especially in rent-controlled jurisdictions in the Bay Area, there may be stricter “just cause” requirements to terminate a tenancy even at lease end.
5. A tenant’s circumstances could change (job loss, financial hardship), but you may have fewer legal avenues to adapt the lease terms mid-agreement.
6. You might delay major renovations or upgrades because the unit is occupied for an extended period.

A Snapshot of the Legal Protections For Long Term Tenants

While California case law does not explicitly define “long-term tenants,” the term is closely associated with long-term occupancy, long-term leases, and the protections afforded to long-term residents under rent control ordinances. Courts have generally interpreted these concepts in the context of zoning regulations, rent control exemptions, and tenant protections, emphasizing the importance of residency and occupancy duration in determining the applicability of certain legal provisions.

Understanding how to navigate these issues for a landlord can be difficult to navigate. Fortunately, our law firm has many years of experience in the landlord-tenant area of practice and can help you with this.

Notice Requirements

 Notice requirements can be one of the biggest potential risks of a longer-term tenant. Landlords should be aware that California tenants who have continuously and lawfully occupied a rental property for 12 months or more are afforded specific legal protections under Assembly Bill 1482 (AB 1482), codified in California Civil Code § 1946.2.

These protections include the requirement that landlords provide a “just cause” for terminating a tenancy. This provision is part of California’s Tenant Protection Act of 2019, which aims to prevent arbitrary evictions and promote housing stability.

It is important to note that these legal protections include a longer notice period requirement for tenants subject to these specific legal protections. A tenant, for example, in a lease agreement only for six months may require a short notice period than a tenant in a term lease of over a year.

In addition, a landlord should be aware that at the expiration of a multi-year term lease an acceptance of the rent triggers an automatic month to month tenancy and requires the longer notice period requirement even though the tenant is on a month-to-month tenancy. The notice period does not change to a 30-day notice.

A landlord is still required to give a 60-day notice. This fits with the potential risk category for landlords to consider that longer notice periods mean fewer options to quickly regain possession. These notice requirements do not stop there. A landlord will also have to consider these requirements when changing the terms of the tenancy or taking a property off the rental market.

Rent Increase Limits Under AB 1482

 If a tenant is in a tenancy for over a year, then the landlord must follow certain limitations in increasing the rent. AB 1482 imposes strict limits on annual rent increases for covered properties. Specifically, landlords may not increase rent by more than 5% plus the local Consumer Price Index (CPI) percentage increase, or 10% of the lowest rental rate charged in the preceding 12 months, whichever is lower.

This cap applies to all rent increases within a 12-month period. 4 CCR § 10336. The law aims to protect tenants from sudden and substantial rent hikes, which could lead to displacement. While this can be seen as cumbersome, the benefit landlords can consider is the predictability this provides. By having capped rent increases landlords can maintain stable tenant relationships which is a benefit to having a long-term tenant.

Landlord Recommendations

Whether you are a landlord considering a long-term tenant, in the middle of a lease with one, or exiting a relationship with one it is good to stay informed of landlord obligations and rights. The above legal regulations are but a snapshot of the growing landscape that landlords must navigate with an increased supply of long-term tenants. As tenant vacancies decrease, there are less opportunities for new landlords to enter the market.

Landlords have to become more dialed into the upcoming law, but many landlords have also taken rentals off the market because they have become worn down from having to navigate the California legal landscape. Our law firm helps with landlords in the risk management of long-term lease agreements including but not limited to lease reviews, legal compliance, recommendations on management with tenants, and end of lease planning.

Long-term tenants can become a benefit or a liability to landlords. Long-term tenants can become difficult when it comes to terminating a tenancy because they feel the property has become their home. Engaging with these tenants may require negotiating a tenant move out agreement or buyout agreement between the tenant to extricate them out. As they may be more likely to assert their rights and drag out an eviction proceeding.

Our law firm has plenty of experience on negotiating these types of agreements and can assist a landlord to cover their rights. While a long-term tenant can provide stability and reliable income, they can also come with greater legal obligations that limit flexibility for a landlord. A landlord in California will have to balance these factors and stay informed with the evolving laws.